US President, Mexican President-Elect Consider NAFTA Next Steps

Mexico’s left-wing presidential candidate, Andrés Manuel López Obrador, won national elections on Sunday 1 July, setting the stage for the Morena Party leader to take office in December. The result, which was widely expected, has fuelled questions over what this will mean for the timeframe of the negotiations to update the North American Free Trade Agreement (NAFTA).

Once the results were announced, López Obrador emphasised the importance of this “historical day and a memorable night” to the country, which he said was a clear indication that voters are ready “to begin the fourth transformation of Mexican public life."

López Obrador pledged to improve the government’s anti-corruption efforts, for example, along with its support for labour rights, as well as a safer and more stable climate for foreign investors, among other commitments.

Among his top priorities, he added, would be to put in place his party’s social platform, looking particularly to help those domestic communities that have historically been disadvantaged.

López Obrador, Trump talk trade

The Mexican President-elect has already spoken with US President Donald Trump by phone following the election, according to White House Press Secretary Sarah Huckabee Sanders. She told reporters in Washington on Monday 2 July that the call was “positive and constructive,” and that Trump and López Obrador “talked pretty extensively about trade and the willingness for both parties to come together to make a deal.”

Separately, Trump told reporters that day while meeting with Dutch Prime Minister Mark Rutte that the call with López Obrador was a “great conversation about a half an hour long.”

“We talked about NAFTA. We talked about a separate deal, just Mexico and the United States. We had a lot of good conversation. I think the relationship will be a very good one. We’ll see what happens, but I really do believe it’s going to be a good one,” Trump said.

Meanwhile, the incoming Mexican leader said on Twitter that the conversation was “respectful” and would be followed by future talks between officials from both sides. He also said that he proposed “exploring an integral agreement, of development projects which create Mexican jobs and in turn reduce migration and improve security.”

Neither official clarified, however, whether there was any additional willingness to move on politically sensitive issues. Canada, Mexico, and the US have been in negotiations to update NAFTA for nearly a year, and while progress was initially swift, the talks have recently lagged in light of electoral dynamics in the countries involved and deep-seated disagreements on controversial areas, such as automobile rules of origin, dispute settlement, and a possible “sunset clause” for the final accord.

On trade, the Mexican President-elect has already named former WTO official Jesús Seade to take the helm of the country’s NAFTA negotiations with the United States and Canada. Seade has publicly defended the incoming Mexican leader’s commitment to free trade and the NAFTA negotiations, and told Bloomberg last month that he expects the incoming administration to align its negotiating positions closely with those taken under outgoing President Enrique Peña Nieto's government.

"What I have seen of the Mexican position is what it has to be. I don’t think these are partisan questions," he said.

Seade told the news agency that the few months remaining ahead of the US midterms in early November could present an opportunity to wrap up the bulk of the NAFTA talks, suggesting that there “has to be a way to break the impasse” in negotiations. The new Mexican leadership would take office after the midterms, however, on 1 December.

Seade also previewed that Mexico will still advocate for alternative approaches in response to the US’ proposals on rules of origin for automobiles, particularly the US push for sourcing more content from higher wage areas – a move that could disadvantage Mexican producers, despite plans to improve wages across sectors.

Experts predict that the new Mexican government may also be less willing to open up its agricultural markets further, for example.

Meanwhile, US President Donald Trump told Fox News on Sunday, July 1 that he would not endorse a completed deal on NAFTA before the midterm elections, given the need to secure further improvements in the trade accord. The midterms are gearing up to be a bruising fight between the US’ two main political parties for control of the Senate and the House of Representatives.

How the two sides will resolve other trade irritants, such as the US’ tariffs on imported steel and aluminium, remains to be seen. Mexico and Canada have publicly put in place responsive tariffs on US imports, with the Canadian tariffs taking effect on C$16.6 billion (US$12.8 billion) worth of US-made goods this past weekend, covering products ranging from steel and iron goods to coffee, maple syrup motorboats, and pizza.

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